The first step in the home buying process is to narrow down your budget. Figuring out your price range, monthly costs, and getting an estimate for your closing costs is the best way to make sure your home search starts off on the right foot. In this article we’ll go over everything you need to know about how to get a mortgage loan pre-approval so that you can know what to expect when you buy a home.
What is a Mortgage Loan Pre-Approval?
Mortgage Loan Pre-Approval is confirmation from a lender that a home buyer should be able to secure a loan for their home. To get the pre-approval the lender will ask for some paperwork including W-2’s and account statements. The lender will also check your credit rating. Once you’ve been pre-approved the lender will provide you with a letter stating that they have verified your financial information and the purchase price they will approve.
Why Do You Need to Get Pre-Approved?
The number one reason for getting mortgage loan pre-approval is so that you’ll be ready to make an offer on a home when you find the right one. The pre-approval letter will be submitted to the seller when you make an offer. It shows that a lender considers you financially qualified for the purchase. Without this an offer won’t be seriously considered since the seller won’t know if you can get a mortgage.
What’s the Difference Between Mortgage Pre-Approval and Loan Application?
A common myth about mortgage loan pre-approval is that you’re committing to getting a mortgage when you’re pre-approved. The pre-approval isn’t a commitment to getting a mortgage and there’s no fee for pre-approval. You’ll commit to a lender and apply for the loan after you go under contract with a seller.
How Long Does it Take to Get a Pre-Approval?
Getting mortgage pre-approval usually takes a few days to a few weeks. It really depends on your situation and how quickly you can get documentation to the lender. Great lenders will start with an initial consultation, usually by phone, to talk through your situation and go over the mortgage process.
The biggest mistake that we see from potential home buyers is when buyers wait until they’ve found the perfect home before starting the pre-approval process. Looking at homes is a lot more fun than getting mortgage pre-approval but without the pre-approval you won’t be ready to make an offer when that perfect home comes along. In a busy real estate market that perfect home will be sold to someone else before you have time to get pre-approved and make an offer.
How to Find a Lender
Choosing the right lender can make or break an offer on a house. Why? Well, some just have reputations for making transactions difficult or having high fall through rates. A local Philadelphia lender with a great reputation for being easy to work with is invaluable. Plus, they’ll know the local market and the specifics of how things work in the area. You can find my list of trusted local lenders here.